Today, I’m going to attempt to explain “REC” “SREC” aka “Green Tags.” I say try because these can be really, really…really complicated. They’re also worth money, so again, I’ll try, but the truth is that these things are variable in every State.

First the simple: What do all of those letters mean?

“REC” “SREC” and Green Tags are all different short handed names for the same thing.

SREC (Sometimes spelled S-REC) stands for Solar Renewable Energy “Certificates” or “Credits.” As for Green Tags, I have no idea where that nickname comes from, but it’s the same thing as the others.

RECs, SRECs Green Tags or whatever you want to call them can be derived from other kinds of renewable energy, such as wind. So they don’t just count for solar, but that depends on your state. For sake of simplicity, I’m going to call them SRECs, and the “C” will stand for “Credit.”

What kind of “credits” are we talking about, Solar Fred?

I’ll tell you one thing. It’s not a “carbon credit.” That’s something entirely different. Don’t get me started on carbon credits. Dogs will howl if I get started on those things. Let’s stick with SRECs.

SRECs are in fact a “credit” for the amount of clean solar energy that your solar panels produce. Dirty utilities in some states need a certain amount of these credits in order to comply with the State’s Renewable Portfolio Standards (RPS).

How do utilities get these credits? Generally, two ways: They either build solar or wind farms and/or they pay you for the clean power your solar panels produce.

And how much cash is that credit worth?

That answer is complicated, but let me keep it simple: It depends.

Currently, it depends largely on your state, sometimes your utility, the laws that have been passed in regards to the RPS, and how much the SREC is worth on your local SREC market. The SREC market is similar to a stock market…in some states. Supply and demand determine the price.

This means that 1 SREC in Connecticut will not be the same price as an SREC in New Jersey, and visa versa. In fact, depending on the State and market, that SREC could be worth, say, $50 one month or $200 another month–in the same state. Again, think Wall Street.

Other things to keep in mind if you still have a mind and reading this:

Your solar or wind system must be tied to grid to get SRECs. This is not a program for off-grid homesteaders.

Now it gets really complicated, because every state is different. With some states, utilities have their own special SREC programs. Some states allow you to sell your SRECs directly to the market. Some utilities will give you a lower upfront State solar rebate if you decide to keep your SRECs instead of selling them to the utility at a set price for a certain time period. Entire states, like New Jersey, let you to keep your SRECs and let you sell them at a scheduled SREC auction…or to a middleman who does this for you. Some SRECs are guaranteed a steady per kilowatt rate that your panels produce for a certain amount of time, say a 3 year period. The exceptions and variables are numerous. But wait, it gets worse!

When you sell your SRECs, you are selling the “environmental benefit” of your solar panels to someone else, like the utility, who by law needs clean power. Think Vampire. You’re selling the “green soul” of your solar panels. Your panels become the Solar Undead.What does this mean in practical terms?

In effect, it means that you personally can no longer claim to have green power on your roof. Yes, I know that the panels are clearly on your roof, but as far as the law is concerned, you as a home owner (or a business owner) cannot advertise or claim to produce clean green solar power energy. You’ve sold that right when you sold your SRECs.

You think I’m lying or purposely trying to confuse you, but it’s all true! And because I’m writing generally across these 50 United States, I can’t be specific.

The good news is that I will eventually get to robust SREC States like New Jersey and Connecticut and try to break these programs down for you.

In the meantime, you can also check your utility’s website, your State’s website, or www.dsireusa.org/solar, a database of solar incentives across the 50 states.

Of course, you can also easily get this info from a local installer by getting a free quote. They might even be able to explain it better than I can, ’cause, you know, they live in the state and should know.

This is directed to those of you that are not solar panel experts and are thinking about making the investment. Before you invest in solar panels you really need to do your due diligence and research this thoroughly. I can’t express this enough as we were blindsided. We live in NJ and 2 years ago we were talked into a $50,000 solar panel investment with promises that through the S-recs we would recoup our investment within 4 years. The S-recs at the time were about $600. We did not understand S-recs or how they worked. We were told that “the energy we produced less what we used would be ‘bought’ back for $600 per unit.” We were producing 1 unit per month. We save about $2,000 per year on our electric bill and the S-recs price dropped to about $100 about one month after our unit was up and running. We haven’t sold any S-recs yet. So……in reality we are getting a $2,000 per year savings on our electric bill, with a potential monthly earning of $100 ($1,200 annually) for which we spent $50,000. Not calculating the interest cost on the $50,000 investment it will take us almost 16 years to recover this cost. Any one with half a brain will realize that this was not a wise investment. Think twice before you purchase solar panels.

NJ SREC prices for 2012 energy year dropped substantially due to the oversupply in the state. I guess that is a good thing for those of us who love solar but did slow down my payoff of the system I installed last year. They are starting to bounce back this month. I noticed on the SREC Marketplace website that they are up to $300. Not the $600 of last year but better than the low of $150.

Regarding RECs, I need help with some legaleeze. I got a bid for a PV installation from the largest local installer here in Houston. Their contract has a clause that looks like it says THEY get all the RECs and carbon credits! Is this common practice??? What would you do in this case?

Here’s the actual wording:

L. Carbon Credits; Renewable Energy Credits.
To the extent not otherwise assigned or sold to Customer’s electric utility provider, in consideration for the Equipment, and for other good consideration, the value of which is hereby acknowledged by Customer, Customer hereby assignes its rights, title and interest to any and all renewable energy credits (RECs), “Green Tags” and/or carbon credits arising out of or resulting from the Installation of the Equipment by the Company. Customer expressly understands and agrees that all RECs, “Green Tags” and/or carbon credits that are created by the Installation, existence, and operation of the Equipment shall belong to Company. Company may report or register ownership of the RECs, “Green Tags” and carbon credits with any entity and may utilize, transfer or assign same in any manner.

Marty in MD and NJ Hamilton –
I’m in MD, getting ready to make the dive into our SREC management, too. Our installer offered two SREC deals: a 15-year upfront buyout to reduce the cost of our intitial install, or to buy our SRECS as produced and aggegate/sell and give us our share. We chose to do it ourselves and I’m just getting started. Marty, you answered my question about whether I could enter the NJ market. Bummer. We have our interconnection paperwork from BG&E – but I think I need something else from the MD Public Service Commission. Our system is 10.08KW (so my assumption is this does not fall under their application for “Less than 10KW AC” system – so I don’t know where to get the paperwork. Think I’ll call installer.

The good news, though, is that we got our first report from Enphase – We installed in Mid-June and have already generated 2.7MW by 31JUL. So though we’re stuck with under $300/SREC due to the MD APC, it’s still a tidy little “extra” that will help pay our system off.

Nice post Solar Fred. You explain SRECs and RECs to the newbies well. I just have a few comments.

There is a big difference between a megawatt and a megawatt-hour. 1 MWh = 1 SREC.

Almost 2 years ago the Alternative Compliance Payment was changed to $711 dropping off about 2.5% every year for 8 years, etc. SRECs were double in value when you posted this, if you take the right sales approach.

SRECs don’t just change in value from $300 to $400 randomly or because of an auction. It’s not a very volatile market. The value changes because of your sales method, supply and demand, contract negotiations and who the buyer is. SRECs are strong in NJ and will hold very close to the ACP. The issue is buyers in NJ don’t want to sign a million contracts for 1 or 5 SRECs each…its easier for them to pay the ACP or buy from larger producers.

If you make less than, let’s just say 50 SRECs a year, your best bet is to find an aggregator that bundles them up and sells them for you, like what NJHamilton did. BTW, that’s awesome that you got $665+ for your SRECs. Sounds like he sold them to Flett exchange and they sold them or did he actually contract with the energy supplier?

I’m soooo jealous. I live in MD and i’m shut out of the NJ SREC market. The most I can get for my SREC’s is $400 which is equal to the state’s current compliance fee. I can sell in PA also but NJ has the highest SREC prices. Stay away from the brokers and use SREC Trade. 3% commission is way better than the 25% commission those crooks charge!

I just got a 10KW solar system installed on my roof by a local contractor using Solar World panels. The installer is a broker for srecs but charges 15% commission on every sale. I think that is too high and want to register as a seller myself. My question is , I am in PA , can I sell to NJ , and where to I sign up? http://[email protected]

Well, I’m a little late but… here’s results of my first SRECS transaction experience.. I I transferred the certificate from the GATS account to my Flett-exchange account and it was sold within minutes… price $665.75 smackarus… LoL.. well I was skeptical at first, but now… let the sun shine….

HI again, I finally figured out all the details about the NJ SRECS… well at least on how to sell them. Once I’ve earned an srec, I can either post on the GATS bulletin board, or I can transfer that srec to my flett exchange account. I’m not sure which is better, or even if there’s an advantage on one or the other, tomorrow the 31st I will have earned my first srec. I will post my experience with this either way.

I made a mistake on my last post. The broker I use now charges a small commission to the seller. It’s either 3 or 5 percent.

If you’re installing a system and your installer has a recommended broker, read the literature from that broker carefully. In many cases, including mine, that broker wasn’t offering a very good deal. I estimated that I was receiving less than half the revenue generated by my SRECs! For the first term of the agreement the installer was actually getting a cut, which explains why they are interested in ‘recommending’ the broker.

I love my installer and they did a fantastic job with the system but I see a conflict of interest when it comes to the broker.

There are lean and mean brokers out there who take only a small cut. If a broker has a thick, complicated contract, my opinion is that you should give some consideration to alternatives. There’s no reason the arrangement should be so complicated and costly to you, the person who is installing the system.
.-= Dave Conifer´s last blog ..Is SREC Income Taxable? =-.

NJHamiltonres — I live about forty miles south of you in Gloucester County. For the last few months I’ve sold my SRECs at auction for $660. If you sign up with the wrong broker you won’t see all that money, and I suspect that’s what you’re talking about. The broker I use runs auctions across in states all across the mid-Atlantic, and only the buyer pays a commission. So I get the entire price of each SREC, which has been $660 for the past few months in New Jersey.

You should check out my blog, where I talk about SRECs and everything else I’ve experienced. I’m not as smart as SolarFred but I try to provide down to earth practical information of everything about the solar experience.

NJ-Hamilton-res, I don’t have any experience managing the SRECs or doing it myself. In general, no matter what product you’re talking about, I believe in the old adage that you get what you pay for. If you’ve got the time to go through the details and keep up with the SREC market, do it yourself. If you just want to collect the check and not worry about the market, have an SREC broker manage SRECS and know that he/she is earning his cut by saving you time and effort.

Yes, they evaluated orientation, trees, electrical usage, Solar angels etc.. the system is actually advertised as an 8KW system, but the actual output for SRECS is 7.2 yearly (estimated). I think i’m glad I did it.. LoL… still a little leary you know… until I see the first check in my hands, then I think I’ll feel a little better.. anyway, there are many reasons why I purchased the system, 3 of the most important to me is “environment,the added value to my home and the SRECS” everything else is just a plus. But I have a question if you don’t mind answering, I’m planning on managing the SRECS myself, do you think that’s a good idea..? or should I have someone manage my account..?

Hello, I’ve just purchased a 7.2KW 36 Panel Solar system, through Home Depot, all their marketing forms had the SREC’s selling anywhere from $400 – $700… I’m slowly realizing that is not the case… I’m finding that the most they could be worth is $300.. well I guess its better then nothing, but boy $400 or even $700 would have been better… LOL

First of all, you rock for going solar. Thank you. Second of all, as explained here and in the comments below, the value of SRECs are variable. It’s a market based system in NJ, so what is $300 now could be $400 or more in a few months. It depends on the auction. Finally, keep in mind that your SRECS is the gift that keep on giving. It’s not a one time payment, but a yearly payment for as long as the system in NJ continues to have this auction based system. That’s ON TOP of the NJ rebate and the 30% Federal Investment Tax Credit. In many states, REC/SREC value is either captured by the utility for the upfront rebate or there is simply no market for it… yet.

One of these days things are going to get standardized. For now, NJ is the best state for solar AND for RECs right now. Honest. I can’t think of any other REC program that’s good for homeowners.

BTW, I hope you got the right size system and someone gave your energy usage a fair evaluation. 7.2kW system is a fairly large residential system. You must have a pretty large home with a lot of gadgets and HVAC system…..? I don’t know Home Depot’s solar selling system, so I can’t say whether they do it right. If you buy too many panels, that’s no good either, especially if you don’t have the roof space to them on, or your roof is facing the wrong direction or you have too many trees. …. As I said, I hope they did a proper evaluation of more than just your energy usage.

Thank you Solar Fred. This is my first search into solar panels, which we will probably install. SREC’s were the most vague part of the plan. Thank’s for the plain language. This was easier and more fun than the Government Dribble Websites :)

I’m not quite clear on this selling your green energy to the devil business. In a net-metering arrangement that many grid connected solar installations are producing their electricity, do you get (S)RECs for *every* MW you produce or just the MWs you produce over your consumption?

Ben, you get SRECS for every megawatt you produce. I know it’s confusing, believe me, but the point of it is for the utility to have “proof” that it is complying with the state mandate of producing so much renewable energy, as required by law. So, it doesn’t matter whether you use it or it’s excess, an SREC shows the State, hey, look, I used that much less coal fired CO2 generation this month. I’m complying with the law, and I’m paying Ben for his “green” power because y’all know I’m not producing any (or much.)” Does that sort of dialog clear it up? Hope so.

Hey SolarFred, great blog and great post! You have some really good information on here for people interested in solar. Here’s some additional info on SRECs:

-An SREC is created after the solar system has generated 1000 kW (1 MW) of electricity. It is important to remember that the SREC is separate from the electricity. The owner of the solar system uses the actual electricity the system produces, decreasing their electricity bill, and then can also sell the SREC as a way to recoup the initial investment. You’re correct in your explanation of selling the “environmental benefit” of your solar panels. Once the electricity suppliers buy SRECs, they can claim that some of the electricity the produce is renewable, even though the utility itself did not generate renewable energy.

-For each state that has an SREC program (and you’re correct, each state is different), there is effectively a price cap on what each SREC in the state is worth. The price cap is determined as follows: As part of the RPS, utilities and electricity suppliers need to buy a certain amount of SRECs each year. If they don’t purchase enough SRECs to meet the requirement set forth by the state, they must pay an Alternative Compliance Payment, or ACP, for each SREC they are short. As a result the electricity suppliers will only pay a price below the ACP for each SREC. The ACP is the price cap. Fortunately in mature markets, such as New Jersey, the market price has been very close to the ACP- about 95%. The ACP in most states is set to slowly decrease over time, as more individuals are expected to enter the solar programs, and the requirements for renewable energy provided by the electricity suppliers increase.

-There are two was to sell your SRECs: on the spot market, and through a contract. They each have their own benefits. With a contract, solar system owners know that they will recoup the investment of their solar panels, and they know when this will happen. However since they are guaranteed that their SRECs will be purchased, the amount of money they receive for each SREC is significantly discounted from the current spot market price for SRECs. Thus the benefit of selling SRECs on the spot market is that it typically will yield the highest prices. Yet you must also consider that there is a fair amount of uncertainty regarding these markets- while we will see a demand for renewable energy continue, there is no guarantee that certain programs and incentives, such as SRECs, will exist down the road. Thus we can say that the spot market factors in a certain degree of risk, and this is while it gives higher prices, while a contract gives the solar panel owner a known, fixed revenue stream.

-You aren’t required to sell your SRECs, yet the vast majority of people do. However as more people recoup the investment of their solar panels through selling SRECs, we might see some solar panel owners stop selling their SRECs and retain their green energy for themselves. This would cause the electricity suppliers to generate their own renewable energy to meet RPS requirements, at last!

Let me know how your info is shaping up regarding future posts on specific states. I’m sure that we have a fair amount of information that would be helpful to you and your followers, all of which we’d be happy to share. Keep up the good work!

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